WHEREAS municipalities in Alberta are governed by the Municipal Government Act, established by the Government of Alberta; and
WHEREAS municipalities in Alberta are dependent on property tax revenues to provide essential municipal services; and
WHEREAS municipalities in Alberta are responsible to collect and forward the education requisition to Alberta Education; and
WHEREAS property taxes remain the main source of revenue for municipalities, as provincial and federal transfers are diminishing, while the downloading and offloading of services and programs continues; and
WHEREAS the ability of a municipality to recover linear property tax arrears is affected by provincial acts and regulations established by Alberta Energy under which the Alberta Energy Regulator (AER) authorizes transfers; and
WHEREAS the AER does not currently have the power to impose conditions on license transfers relating to unpaid municipal taxes; and
WHEREAS the current legislation has limited the recourse available to a municipality to recover tax arrears owed from oil and gas companies;
THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) requests the Government of Alberta amend the Municipal Government Act (MGA), and other provincial legislation, regulations and policies, including AER Directive 006: Licensee Liability Rating (LLR) Program and Licence Transfer Process to:
FURTHER BE IT RESOLVED that the AAMDC request that Alberta Energy direct the AER that prior to refunding any security deposits, check with all municipalities in which the company requesting the refund had leases in, to ensure property taxes are current.
Camrose County has been challenged with the collection of tax arrears from numerous oil and gas companies. The tax collection obstacles are created by the existing restrictions within current legislation and the ability of assets to be transferred from the current license holder to another without respect to and in fact, free and clear of any obligation for payment of the outstanding municipal taxes. As a result, the County’s prospect for collecting $491,031.09 in taxes and education requisition is bleak. The education tax, of some $103,589.50, must be remitted to the Government of Alberta regardless of whether it has been collected, ratepayers are responsible to cover that deficit resulting from uncollected oil and gas taxes, which in turn actually costs $207,179.00 from the current budget.
The Alberta Energy Regulator Directive 006, released February 17, 2016 states that:
The purpose of the Alberta Energy Regulator (AER) LLR Program and licence transfer process as set out in this directive is to
And further as a result of the Redwater decision AER issued Bulletin 2016-21 which again states that:
“The Alberta Energy Regulator (AER) has considered feedback on its interim measures to protect Albertans from unfunded liabilities and issues Bulletin 2016-21 to clarify the requirements.“
The AER reiterates that the interim measures are necessary to protect Albertans from unfunded liabilities.
Bulletin 2016-21 further states that:
As a condition of transferring existing AER licences, approvals, and permits, the AER will require transferees to demonstrate that they have a LMR of 2.0 or higher immediately following the transfer or provide other evidence that the transferee will be able to meet their obligations throughout the life cycle of energy development with an LMR of less than 2.0.
It is the contention of the County that requiring the transferee to demonstrate that they will be able to meet their obligations throughout the life cycle of energy development should, and does include their obligations to pay municipal taxes. Municipal taxes not recovered will be borne by all Albertans, and as a result should fall under the AER mandate to protect Albertans from unfunded liabilities. Therefore, the AER should have jurisdiction to impose a specified condition that all municipal taxes in arrears should be paid prior to the license being transferred.
The AAMDC currently has two active resolutions related to this issue, brought forward from the County of Paintearth in 2016 and Mackenzie County in 2015.
Alberta Municipal Government Act (MGA)
Directive 006 of the Licensee Liability Rating (LLR) Program and License Transfer Process (March 12, 2013) details the application requirements for oil and gas well transfers. Under this Directive, the Alberta Energy Regulator reviews the compliance record of the transferor and the transferee and determines if the regulatory requirements have been satisfied. The Minister of Energy has notified Camrose County that the Alberta Energy Regulator does not have jurisdiction to impose conditions on license transfers relating to unpaid municipal taxes.
The AAMDC is participating in a working group with the Government of Alberta including representatives from Municipal Affairs, Alberta Energy and the Alberta Energy Regulator to explore improvements that can be made to this issue, including determining ways that municipalities can recover unpaid taxes.
4-17S: Collection of Outstanding Taxes for Education Requisitions from the Province of Alberta
THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties request that the Government of Alberta develop new tools or utilize existing mechanisms to ensure that municipalities that are unable to collect education property taxes through the tax recovery process be exempted from forwarding those uncollectible tax amounts to Alberta Education, or have the uncollectible amount refunded.
DEVELOPMENT: The AAMDC appreciates the responsiveness of the Government of Alberta in forming a working group to address this issue in response to previous similar resolutions (3-16S, 5-15F). However, the AAMDC is becoming increasingly concerned with the time that has elapsed between the working group developing recommendations for addressing the issue of uncollectible taxes on industrial properties (early 2017) and the response from the Minister of Municipal Affairs as to what, if any, actions will be taken to address the issue. As many rural municipalities continue to experience similar or greater levels of industrial tax arrears in the current fiscal year, expedient action on this issue is becoming an even greater priority.
The AAMDC assigns this resolution a status of Intent Not Met, but will continue advocating for a Ministerial response to the working group’s recommendation, and will consider amending this status if a response is received prior to the next round of resolution updates.
3-16S: Recovery of Linear Property, Commercial Property, and Education Requisition Tax Arrears
THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) request the Government of Alberta to amend the Municipal Government Act (MGA), and other provincial legislation to broaden the tax recovery power of municipalities to collect linear property taxes by granting a lien in favour of the municipality as follows:
A lien equivalent to that granted to the Alberta Energy Regulator (AER) by s. 103 of the Oil and Gas Conservation Act (OGCA) that being: “on the debtor’s interest in any well, facilities, and pipelines, land or interests in land, including mines and minerals, equipment and petroleum substances” and the power to garnish funds owed to the debtor;
A lien which ranks in priority (or equivalent) to the lien granted in favour of the AER by s. 103(2) of the OGCA;
FURTHER BE IT RESOLVED that the AAMDC requests the Government of Canada to amend the federal Bankruptcy and Insolvency Act to recognize municipal linear property taxes and other municipal non-property taxes as a secured interest in priority to other unsecured interests;
FURTHER BE IT RESOLVED that the AAMDC request the Government of Alberta to provide a credit reimbursement to compensate for the education property taxes that become uncollectable due to linear and commercial property bankruptcy.
DEVELOPMENTS: In 2016, Alberta Municipal Affairs had convened an inter-ministry working group consisting of representatives from Municipal Affairs, Energy, Treasury Board and Finance, Education, and the AER. The purpose of this working group was to address the concerns identified in resolution 3-16S and resolution 5-15F. More specifically, the working group explored how the suite of tools available to municipalities to recover unpaid linear property taxes could be expanded, as well as possible legislative or regulatory solutions to relieve or exempt municipalities from paying provincial education property tax requisitions on linear properties in which the municipality has not been able to gather tax revenues from the property owner.
Early in 2017, the working group completed their research and Government of Alberta staff internally developed options for the Minister of Municipal Affairs based on the working group’s findings. At this point, the AAMDC has been informed that the options are still being considered by the Minister and decision-makers in other related ministries such as Energy and Education. The AAMDC is concerned that as the Government of Alberta continues to evaluate options, rural municipalities throughout the province face increasing financial challenges caused by unpaid linear taxes.
The AAMDC assigns this resolution a status of Intent Not Met, but will continue advocating for a Ministerial response to the working group’s recommendation, and will consider amending this status if a response is received prior to the next round of resolution updates.
5-15F: Recovery of Linear Property Tax Arrears
THEREFORE, BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties (AAMDC) requests the Government of Alberta to amend the Municipal Government Act (MGA), and other provincial legislation to broaden the tax recovery power of municipalities to collect linear property taxes by granting a lien in favour of the municipality as follows:
FURTHER BE IT RESOLVED that the AAMDC requests the Federation of Canadian Municipalities to request the Government of Canada to amend the federal Bankruptcy and Insolvency Act to recognize municipal linear property taxes and other municipal non-property taxes as a secured interest in priority to other unsecured interests;
FURTHER BE IT RESOLVED that the AAMDC request the Province of Alberta to provide a credit reimbursement to compensate for the Education Property Taxes that becomes uncollectable due to linear property bankruptcy.
DEVELOPMENTS: In 2016, Alberta Municipal Affairs had convened an inter-ministry working group consisting of representatives from Municipal Affairs, Energy, Treasury Board and Finance, Education, and the AER. The purpose of this working group was to address the concerns identified in resolution 3-16S and resolution 5-15F. More specifically, the working group explored how the suite of tools available to municipalities to recover unpaid linear property taxes could be expanded, as well as possible legislative or regulatory solutions to relieve or exempt municipalities from paying provincial education property tax requisitions on linear properties in which the municipality has not been able to gather tax revenues from the property owner.
Early in 2017, the working group completed their research and Government of Alberta staff internally developed options for the Minister of Municipal Affairs based on the working group’s findings. At this point, the AAMDC has been informed that the options are still being considered by the Minister and decision-makers in other related ministries such as Energy and Education. The AAMDC is concerned that as the Government of Alberta continues to evaluate options, rural municipalities throughout the province face increasing financial challenges caused by unpaid linear taxes.
The AAMDC assigns this resolution a status of Intent Not Met, but will continue advocating for a Ministerial response to the working group’s recommendation, and will consider amending this status if a response is received prior to the next round of resolution updates.
Alberta Municipal Affairs
The Government of Alberta (GOA) recognizes the non-collection of property taxes has become more problematic in the current economic environment. The GOA also recognizes this situation will likely continue as the economy recovers. The Municipal Government Act has provisions for municipalities to collect such debts; however, the GOA acknowledges that these methods can be difficult to implement.
In response, the GOA launched the Provincial Education Requisition Credit program. This program will provide municipalities with an education property tax credit equal to the uncollectable education property taxes on delinquent oil and gas properties, upon approval of a qualifying application. The first application deadline was earlier this year.
Changes to the Minister’s Guidelines enables well and pipeline assessments to be reduced to zero under specific conditions, which are: being on the Alberta Energy Regulator (AER) Debtor Registry, the AER Insolvency List (with a receivership or bankruptcy status), and having not produced for the 12 months prior to October 31.
Alberta Energy
The GOA is currently reviewing the management of historic, current, and future liabilities associated with oil and gas wells and facilities. The Alberta Association of Municipal Districts and Counties participated in engagement sessions held last summer as part of the review. Alberta Energy, Alberta Environment and Parks, and the AER are actively looking for ways to make sure we are addressing full life cycle management of energy development and reducing the number of inactive wells and facilities. This input will be considered in recommendations being developed to improve the liability management system.
The GOA adheres to the polluter-pays principle. It is the expectation of Albertans and of this government that industry should continue covering the costs related to cleaning up and decommissioning oil wells and associated infrastructure. The GOA is committed to ensuring the liabilities associated with the full life cycle of energy development are managed appropriately and that Albertans and the environment are protected.
RMA appreciates the recognition and the multiple steps being taken by the Government of Alberta to address the challenges faced by municipalities as a result of oil and gas operators who are have not payed property taxes. At this moment, however, there has been only limited improvements for municipalities through the Provincial Education Requisition Credit (PERC) program which only applies to the education property tax portion of the unpaid linear oil and gas property taxes. Until the amendments listed in the resolution are made, or more substantial improvements to the overall liability management system are provided, this resolution is assigned a status of Intent Not Met.